Global snacks will consist of the current Kraft Foods Europe and Developing Markets units as well as the North American snacks and confectionery businesses. As an independent company, global snacks would have estimated revenues of approximately $32 billion and a strong growth profile across numerous fast-growing, attractive markets. Approximately 75 percent of revenues would be from snacks around the world, and approximately 42 percent would come from developing markets, including a diversified presence in numerous highly attractive emerging markets. The business would have a strong presence in the fast-growing and high-margin instant consumption channel. The non-snacks portion of the portfolio would consist primarily of powdered beverages and coffee, which have a strong growth and margin profile in developing markets and Europe. Key brands would include Oreo and LU biscuits, Cadbury and Milka chocolates, Trident gum, Jacobs coffee and Tang powdered beverages.
The North American grocery business would consist of the current U.S. Beverages, Cheese, Convenient Meals and Grocery segments and the non-snack categories in Canada and Food Service. With approximately $16 billion in estimated revenue, this business would be one of the largest food and beverage companies in North America. Its portfolio would include many of the most popular food brands on the continent, with leadership positions in virtually every category in which it competes.
The North American grocery business would have a highly competitive retail presence, cost leadership and a continued commitment to innovation and marketing excellence. North America's strategic priorities would be to build on its leading market positions by growing in line with its categories while maintaining a sharp focus on its cost structure. Capitalizing on the investments that the company has made during its transformation, an independent North American business would be managed to deliver reliable revenue growth; strong margins and free cash flow; and a highly competitive dividend payout. Key brands would include Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese, Maxwell House coffee, Capri Sun beverages, Jell-O desserts and Miracle Whip salad dressing.
Management is targeting capital structures to maintain investment-grade ratings with access to commercial paper for each new entity.
Management is developing detailed plans for the board's further consideration and final approval. To execute the transaction requires further work on structure, management, governance, and other matters, which will take approximately 12 or more months. The current target is to launch the new companies before year-end 2012. The company will provide interim updates as appropriate. Throughout the process, management will remain focused on continuing to realize the benefits of the Cadbury integration and delivering strong business results.
"Our employees' hard work and accomplishments have transformed Kraft Foods and enabled us to take this next step in the company's evolution," said Rosenfeld. "Our global snacks and North America grocery businesses both have terrifically talented and dynamic people. I'm confident that we will maintain the winning spirit that has been key to our success." She continued, "The focus and other benefits that come from creating two independent companies will provide even greater opportunities for our people and our brands."
Any transaction would be subject to customary conditions, including receipt of regulatory approvals, an opinion from tax counsel and a favorable ruling from the Internal Revenue Service to ensure the tax-free status of the spin-off of the North American grocery business to our shareholders, execution of inter-company agreements, further due diligence as appropriate, and final approval by the company's Board of Directors.